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An annuity is a contract made between a purchaser and an insurance company, with the aim of saving money for retirement. The person purchasing the annuity contributes money to a set plan, either in a lump sum or in smaller amounts over time. Once a specified future date is reached—usually once the purchaser enters retirement—the insurer makes regular payments to the purchaser. Just like auto insurance or life insurance, this is a valuable means of protecting your assets and planning for the future.

How Annuities Work

It’s important to understand that annuities are a long-term investment plan, not an overnight get-rich scheme. The company issuing your annuity invests what you pay—called “a principal”—in a way designed to meet your financial goals.

auto insuranceWith a so-called “fixed annuity,” you get a guaranteed interest rate. With a “variable annuity,” your earnings depend on how your investments perform. While the latter offers greater potential for growth, it also is higher risk. Additionally, you can choose whether you want payments made to you over a set time period or if you want lifelong payments.

The Benefits of Annuities

One of the major benefits of annuities is that there is no limit to how much you can invest. Additionally, you are able to grow money without paying taxes on it immediately. When you do withdraw money, you simply pay your regular income tax rate.  

When it comes to financial planning for your future, annuities are just as important as more common investments like life insurance. They can supplement your income once you retire, allowing to live comfortably in your golden years. A financial advisor can create a tailor-made plan that suits your needs.

 

Want to know more about annuities? Kramer-Myers & Werring-Dickerson in Batavia, OH, will be happy to answer your questions. These professionals provide financial solutions, as well as everything from life insurance to home insurance. Since opening their doors in 1960, they have built a reputation for putting their clients first. You can find out more about their history online. For an appointment, call (513) 732-1461.

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